UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(MARK ONE)
For
the quarter ended
For the transition period from to
Commission
file number:
(Exact Name of Registrant as Specified in Its Charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Units, each consisting of one share of Class A common stock and one-half of one redeemable warrant | INKAU | The Nasdaq Stock Market | ||
| The | ||||
| Redeemable warrants, exercisable for one share of Class A common stock at an exercise price of $11.50 per share | INKAW | The Nasdaq Stock Market |
Check
whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company | |||
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As
of May 16, 2022, there were
KLUDEIN I ACQUISITION CORP.
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2022
TABLE OF CONTENTS
i
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
KLUDEIN I ACQUISITION CORP.
CONDENSED BALANCE SHEETS
| March 31, 2022 | December 31, 2021 | |||||||
| (unaudited) | (audited) | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Cash and marketable securities held in Trust Account | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Total current liabilities | ||||||||
| Convertible promissory note – related party (at fair value) | ||||||||
| Warrant liabilities | ||||||||
| Deferred underwriting fee payable | ||||||||
| Total Liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Class A common stock subject to possible redemption; | ||||||||
| Stockholders’ Deficit | ||||||||
| Preferred stock, $ | ||||||||
| Class A common stock, $ | ||||||||
| Class B common stock, $ | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Deficit | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
1
KLUDEIN I ACQUISITION CORP.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
| For the Three Months Ended March 31, | For the Three Months Ended March 31, | |||||||
| 2022 | 2021 | |||||||
| Formation and operational costs | $ | $ | ||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income (expense): | ||||||||
| Transaction costs allocated to warrants | ( | ) | ||||||
| Change in fair value of warrant liabilities | ||||||||
| Change in fair value of convertible promissory note – related party | ||||||||
| Interest earned on marketable securities held in Trust Account | ||||||||
| Unrealized loss on marketable securities held in Trust Account | ( | ) | ( | ) | ||||
| Total other income, net | ||||||||
| Net income | $ | $ | ||||||
| Basic weighted average shares outstanding, Class A common stock | ||||||||
| Basic net income per share, Class A common stock | $ | $ | ||||||
| Basic weighted average shares outstanding, Class B common stock | ||||||||
| Basic net income per share, Class B common stock | $ | $ | ||||||
| Diluted weighted average shares outstanding, Class A common stock | ||||||||
| Diluted net income per share, Class A common stock | $ | $ | ||||||
| Diluted weighted average shares outstanding, Class B common stock | ||||||||
| Diluted net income per share, Class B common stock | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
2
KLUDEIN I ACQUISITION CORP.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2022
| Class B Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||
| Balance – January 1, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Proceeds in excess of fair value of convertible note on issuance date | — | |||||||||||||||||||
| Net income | — | |||||||||||||||||||
| Balance – March 31, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
FOR THE THREE MONTHS ENDED MARCH 31, 2021
| Class B Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ Equity | |||||||||||||||||
| Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||
| Balance – January 1, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Cash paid in excess of fair value for Private Placement Warrants | — | |||||||||||||||||||
| Fair value of Founders Shares attributable to Anchor Investor | — | |||||||||||||||||||
| Re-measurement of Class A common stock to redemption amount | — | ( | ) | ( | ) | ( | ) | |||||||||||||
| Net income | — | |||||||||||||||||||
| Balance – March 31, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
3
KLUDEIN I ACQUISITION CORP.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| For the Three Months Ended March 31, 2022 | For the Three Months Ended March 31, 2021 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
| Interest earned on marketable securities held in Trust Account | ( | ) | ( | ) | ||||
| Unrealized loss on marketable securities held in Trust Account | ||||||||
| Change in fair value of warrant liabilities | ( | ) | ( | ) | ||||
| Change in fair value of convertible promissory note – related party | ( | ) | ||||||
| Transaction costs allocated to warrants | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses | ( | ) | ( | ) | ||||
| Accounts payable and accrued expenses | ||||||||
| Due to Sponsor | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Investment of cash in Trust Account | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from sale of Units, net of underwriting discounts paid | ||||||||
| Proceeds from sale of Private Placement Warrants | ||||||||
| Proceeds from promissory note – related party | ||||||||
| Proceeds from convertible promissory note – related party | ||||||||
| Repayment of promissory note – related party | ( | ) | ||||||
| Payment of offering costs | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Net Change in Cash | ( | ) | ||||||
| Cash – Beginning of period | ||||||||
| Cash – End of period | $ | $ | ||||||
| Non-Cash investing and financing activities: | ||||||||
| Offering costs included in accrued offering costs | $ | $ | ||||||
| Fair value of Founder Shares attributable to Anchor Investor | $ | $ | ||||||
| Proceeds in excess of fair value of convertible note on issuance date | $ | $ | ||||||
| Deferred underwriting fee payable | $ | $ | ||||||
| Remeasurement of Class A common stock subject to possible redemption | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
4
KLUDEIN I ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
NOTE 1 — DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
KludeIn I Acquisition Corp. (the “Company”) is a blank check company incorporated in Delaware on September 24, 2020. The Company was formed for the purpose of effectuating a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more businesses (the “Business Combination”). The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of March 31, 2022, the Company had not commenced any operations. All activity through March 31, 2022 relates to the Company’s formation and the initial public offering (the “Initial Public Offering”), which is described below, and subsequent to the Initial Public Offering, identifying a target company for a Business Combination. The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest. The Company generates non-operating income in the form of interest income and unrealized gains from the marketable securities held in the Trust Account (as defined below), and gains or losses from the change in fair value of the warrant liabilities and convertible promissory note.
The registration statement
for the Company’s Initial Public Offering was declared effective on January 6, 2021. On January 11, 2021, the Company consummated
the Initial Public Offering of
Simultaneously with the
closing of the Initial Public Offering, the Company consummated the sale of
The Company incurred $
Following the closing of
the Initial Public Offering on January 11, 2021, an amount of $
The Company’s management
has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of the Private
Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business
Combination. Nasdaq Capital Markets rules provide that the Business Combination must be with one or more target businesses that together
have a fair market value equal to at least
The Company will provide
its holders of the outstanding Public Shares (the “public stockholders”) with the opportunity to redeem all or a portion
of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called
to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder
approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The public stockholders
will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated
to be $
5
KLUDEIN I ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
The Company will proceed
with a Business Combination only if the Company has net tangible assets of at least $
Notwithstanding the above,
if the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer
rules, the Amended and Restated Certificate of Incorporation provides that a public stockholder, together with any affiliate of such
stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its Public Shares
with respect to more than an aggregate of
The Sponsor has agreed (a) to
waive its redemption rights with respect to its Founder Shares and Public Shares held by it in connection with the completion of a Business
Combination, (b) to waive its liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination
by July 11, 2022 and (c) not to propose an amendment to the Amended and Restated Certificate of Incorporation (i) to modify
the substance or timing of the Company’s obligation to allow redemption in connection with the Company’s initial Business
Combination or to redeem
The Company will have until
July 11, 2022 to complete a Business Combination (the “Combination Period”). If the Company is unable to complete a Business
Combination within the Combination Period, the Company will (i) cease all operations except for the purpose of winding up, (ii) as
promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable
in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust
Account and not previously released to the Company to pay its tax obligations (less up to $
The Sponsor has agreed to
waive its liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination
Period. However, if the Sponsor acquires Public Shares in or after the Initial Public Offering, such Public Shares will be entitled to
liquidating distributions from the Trust Account if the Company fails to complete a Business Combination within the Combination Period.
The underwriters have agreed to waive their rights to their deferred underwriting commission (see Note 6) held in the Trust Account in
the event the Company does not complete a Business Combination within the Combination Period and, in such event, such amounts will be
included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event
of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than the
Initial Public Offering price per Unit ($
In order to protect the amounts
held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a third party for services
rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction
agreement, reduce the amount of funds in the Trust Account to below (1) $
6
KLUDEIN I ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
Liquidity and Going Concern
As of March 31, 2022, the
Company had $
Until the consummation of a Business Combination, the Company has used and will be using the funds not held in the Trust Account for identifying and evaluating prospective acquisition candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to acquire, and structuring, negotiating and consummating the Business Combination.
In order to fund working
capital deficiencies or finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor
or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working
Capital Loans”). Such Working Capital Loans would be evidenced by promissory notes. If the Company completes a Business Combination,
it may repay the notes out of the proceeds of the Trust Account released to it. In the event that a Business Combination does not close,
the Company may use a portion of the working capital held outside the Trust Account to repay the notes, but no proceeds from our Trust
Account would be used for such repayment. On January 21, 2022, the Company issued a promissory note with respect to the Working Capital
Loans in the principal amount of up to $
In connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standards Board’s Accounting Standards Codification Subtopic 205-40, “Presentation of Financial Statements – Going Concern,” the Company has until July 11, 2022, to consummate an initial Business Combination. It is uncertain that the Company will be able to consummate an initial Business Combination by this time. If an initial Business Combination is not consummated by this date, there will be a mandatory liquidation and subsequent dissolution of the Company. Additionally, the Company may not have sufficient liquidity to fund the working capital needs of the Company through one year from the issuance of these condensed financial statements. Management has determined that the liquidity condition and mandatory liquidation, should an initial Business Combination not occur, and potential subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after July 11, 2022.
Risks and Uncertainties
Management continues to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of the condensed financial statements. The condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
In February 2022, the Russian Federation and Belarus commenced a military action with the country of Ukraine. As a result of this action, various nations, including the United States, have instituted economic sanctions against the Russian Federation and Belarus. Further, the impact of this action and related sanctions on the world economy are not determinable as of the date of these financial statements. The specific impact on the Company’s financial condition, results of operations, and cash flows is also not determinable as of the date of these financial statements.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.
7
KLUDEIN I ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s annual report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on April 12, 2022. The accompanying condensed balance sheet as of December 31, 2021 has been derived from the audited financial statements included in that annual report. The interim results for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any future periods.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of condensed financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed financial statements and the reported amounts of income and expenses during the reporting periods.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the condensed financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as of March 31, 2022 and December 31, 2021.
Marketable Securities Held in Trust Account
At March 31, 2022 and December 31, 2021, substantially all of the assets held in the Trust Account were primarily invested in U.S. Treasury securities. All of the Company’s investments held in the Trust Account are classified as trading securities. Trading securities are presented on the condensed balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of investments held in the Trust Account are included in interest earned on marketable securities held in Trust Account in the accompanying condensed statements of operations. The estimated fair values of investments held in Trust Account are determined using available market information.
8
KLUDEIN I ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
Class A Common Stock Subject to Possible Redemption
The Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in ASC Topic 480, “Distinguishing Liabilities from Equity.” Class A common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including Class A common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, Class A common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s condensed balance sheets.
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period. Immediately upon the closing of the Initial Public Offering, the Company recognized the re-measurement from initial carrying value to redemption amount, which approximates fair value. The change in the carrying value of redeemable Class A common stock resulted in charges against additional paid-in capital (to the extent available), accumulated deficit and Class A common stock during the three months ended March 31, 2021. There were no changes in the carrying value of redeemable Class A common stock during the three months ended March 31, 2022.
At March 31, 2022 and December 31, 2021, the shares of Class A common stock reflected in the condensed balance sheet as temporary equity were reconciled in the following table:
| Gross proceeds for the Initial Public Offering | $ | |||
| Less: | ||||
| Proceeds allocated to the initial fair value of Public Warrants | ( | ) | ||
| Class A common stock issuance costs | ( | ) | ||
| Fair value of Founder Shares attributable to Anchor Investor allocated to redeemable Class A common stock, net of allocated transaction costs | ( | ) | ||
| Plus: | ||||
| Re-measurement of carrying value to redemption value | ||||
| Class A common stock subject to possible redemption | $ |
Warrant Liabilities
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480, and ASC 815, “Derivatives and Hedging” (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own shares of common stock, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the condensed statements of operations. For the Private Placement Warrants, the fair value was estimated using a binomial lattice model incorporating the Cox-Ross-Rubenstein methodology since the closing date of Initial Public Offering and as of March 31, 2022 (see Note 9). For the public warrants, the fair value was estimated using a binomial lattice model incorporating the Cox-Ross-Rubenstein methodology at the closing date of Initial Public Offering and the level 1 quoted prices in an active market since the public warrants starting trading separately on March 1, 2021 and as of March 31, 2022 (see Note 9).
Convertible Instruments
The Company evaluated the accounting for its promissory notes that feature conversion options in accordance with ASC 815, Derivatives and Hedging Activities (“ASC 815”). ASC 815 requires companies to bifurcate conversion options from their host instruments and account for them as freestanding derivative financial instruments according to certain criteria. The criteria includes circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) a promissory note that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. However, the Company has elected to account for its promissory notes at fair value, as described in Note 9.
9
KLUDEIN I ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
Allocation of issuance costs
The Company accounts for the allocation of its issuance costs to its
warrants using the guidance in ASC Topic 470-20, “Debt with Conversion and Other Options” (“ASC 470-20), applied by
analogy. Under this guidance, if debt or stock is issued with detachable warrants, the proceeds need to be allocated to the two instruments
using either the fair value method, the relative fair value method, or the residual value method. The guidance also requires companies
to use a consistent approach in allocating issuance costs between the instruments. Accordingly, the Company allocated its issuance costs
of $
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the condensed financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. As of March 31, 2022 and December 31, 2021, the Company has provided a full valuation allowance against its net deferred tax assets.
ASC 740 prescribes a recognition threshold and a measurement attribute for the condensed financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of March 31, 2022 and December 31, 2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.
For interim periods, the income tax provision or benefit related to
ordinary income or loss is computed at an estimated annual effective income tax rate and the income tax provision or benefit related to
all other items is individually computed and recognized when the items occur. The effective tax rate differs from the statutory tax rate
of
Net Income per Share of Common Stock
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. Net income per share of common stock is computed by dividing net income by the weighted average number of shares of common stock outstanding for the period. The Company applies the two-class method in calculating income per share of common stock. Re-measurement associated with the redeemable shares of Class A common stock is excluded from income per share of common stock as the redemption value approximates fair value. Net income is allocated among the classes of common stock based on weighted average shares outstanding.
The calculation of diluted
income per share of common stock does not consider the effect of the warrants issued in connection with the (i) Initial Public Offering,
and (ii) the private placement since the exercise of the warrants is contingent upon the occurrence of future events. The warrants
are exercisable to purchase
Founder Shares subject to forfeiture (see Note 5) are not included in weighted average shares outstanding for basic net income per share until the forfeiture restrictions lapse, however, they are included in weighted average shares outstanding for diluted net income per share for the entire period.
10
KLUDEIN I ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
The following table reflects the calculation of basic and diluted net income per share of common stock (in dollars, except share amounts):
| For the Three Months Ended March 31, 2022 | For the Three Months Ended March 31, 2021 | |||||||||||||||
| Class A | Class B | Class A | Class B | |||||||||||||
| Basic net income per share of common stock | ||||||||||||||||
| Numerator: | ||||||||||||||||
| Allocation of net income | $ | $ | $ | $ | ||||||||||||
| Denominator: | ||||||||||||||||
| Basic weighted average shares outstanding | ||||||||||||||||
| Basic net income per share of common stock | $ | $ | $ | $ | ||||||||||||
| Diluted net income per share of common stock | ||||||||||||||||
| Numerator: | ||||||||||||||||
| Allocation of net income | $ | $ | $ | $ | ||||||||||||
| Denominator: | ||||||||||||||||
| Diluted weighted average shares outstanding | ||||||||||||||||
| Diluted net income per share of common stock | $ | $ | $ | $ | ||||||||||||
Concentration of Credit Risk
Financial instruments that
potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times,
may exceed the Federal Depository Insurance Coverage of $
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying amounts represented in the Company’s condensed balance sheets, primarily due to their short-term nature, except for warrants (see Note 9).
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s condensed financial statements.
NOTE 3 — INITIAL PUBLIC OFFERING
Pursuant to the Initial
Public Offering, the Company sold
NOTE 4 — PRIVATE PLACEMENT WARRANTS
Simultaneously with the closing of the Initial Public Offering, the
Sponsor purchased an aggregate of
11
KLUDEIN I ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
NOTE 5 — RELATED PARTY TRANSACTIONS
Founder Shares
On September 24, 2020, the Sponsor paid $
The Sponsor and its director nominees have agreed, subject to certain limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier to occur of: (A) one year after the completion of a Business Combination or (B) subsequent to a Business Combination, (x) if the last sale price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after a Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property.
In connection with the closing of the Initial Public Offering, the
Anchor Investor acquired from the Sponsor an indirect economic interest in an aggregate of
12
KLUDEIN I ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
The transfer of the Founders Shares to the Company’s director nominees, as described above, is within the scope of FASB ASC Topic 718, “Compensation-Stock Compensation” (“ASC 718”). Under ASC 718, stock-based compensation associated with equity-classified awards is measured at fair value upon the grant date. The Founders Shares were effectively transferred subject to a performance condition (i.e., the occurrence of a Business Combination). Compensation expense related to the Founders Shares and common stock purchase warrants is recognized only when the performance condition is probable of occurrence under the applicable accounting literature in this circumstance. Stock-based compensation would be recognized at the date a Business Combination is considered probable in an amount equal to the number of Founders Shares times the grant date fair value per share (unless subsequently modified) less the amount initially received for the purchase of the Founders Shares. As of March 31, 2022 and December 31, 2021, the Company determined that a Business Combination is not considered probable, and, therefore, no stock-based compensation expense has been recognized.
Promissory Note — Related Party
On September 24, 2020, the
Sponsor agreed to loan the Company an aggregate of up to $
Related Party Loans
In order to finance transaction costs in connection with a Business
Combination, the Sponsor or an affiliate of the Sponsor or certain of the Company’s directors and officers may, but are not obligated
to, make Working Capital Loans. If the Company completes a Business Combination, the Company would repay the Working Capital Loans out
of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held
outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside
the Trust Account to repay the Working Capital Loans, but no proceeds held in the Trust Account would be used to repay the Working Capital
Loans. The warrants would be identical to the Private Placement Warrants described in Note 8. On January 21, 2022, the Company issued
a promissory note with respect to the Working Capital Loans in the principal amount of up to $
NOTE 6 — COMMITMENTS AND CONTINGENCIES
Registration Rights
Pursuant to a registration rights agreement entered into on January 6, 2021, the holders of the Founder Shares, Private Placement Warrants and any warrants that may be issued upon conversion of the Working Capital Loans (and any shares of Class A common stock issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans and upon conversion of the Founder Shares) will have registration rights to require the Company to register a sale of any of the Company’s securities held by them. These holders of these securities will be entitled to make up to three demands, excluding short form registration demands, that the Company register such securities for sale under the Securities Act. In addition, these holders will have “piggy-back” registration rights to include their securities in other registration statements filed by us, subject to certain limitations. The registration rights agreement does not contain liquidating damages or other cash settlement provisions resulting from delays in registering the Company’s securities. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
13
KLUDEIN I ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
Underwriting Agreement
The underwriters are entitled
to a deferred fee of $
Contingent Legal Fees
As of March 31, 2022 and
December 31, 2021, the Company has incurred legal fees of $
NOTE 7 — STOCKHOLDERS’ DEFICIT
Preferred Stock —
The Company is authorized to issue up to
Class A Common Stock —
The Company is authorized to issue up to
Class B Common Stock —
The Company is authorized to issue up to
Holders of Class A common stock and Class B common stock will vote together as a single class on all other matters submitted to a vote of stockholders, except as required by law.
The shares of Class B
common stock will automatically convert into shares of Class A common stock at the time of a Business Combination on a one-for-one
basis (subject to adjustment). In the case that additional shares of Class A common stock or equity-linked securities are issued
or deemed issued in connection with a Business Combination, the number of shares of Class A common stock issuable upon conversion
of all Founder Shares will equal, in the aggregate, on an as-converted basis,
NOTE 8 — WARRANT LIABILITIES
As of March 31, 2022 and
December 31, 2021, there were
The Company will not be obligated to deliver any Class A common stock pursuant to the exercise of a Public Warrant and will have no obligation to settle such Public Warrant exercise unless a registration statement under the Securities Act covering the issuance of the Class A common stock issuable upon exercise of the Public Warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration. No warrant will be exercisable and the Company will not be obligated to issue shares of Class A common stock upon exercise of a warrant unless Class A common stock issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants.
14
KLUDEIN I ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
The Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of a Business Combination, it will use its best efforts to file with the SEC a registration statement registering the issuance of the shares of Class A common stock issuable upon exercise of the warrants, to cause such registration statement to become effective and to maintain a current prospectus relating to those shares of Class A common stock until the warrants expire or are redeemed, as specified in the warrant agreement. If a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants is not effective by the 60th business day after the closing of a Business Combination or within a specified period following the consummation of a Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” pursuant to the exemption provided by Section 3(a)(9) of the Securities Act; provided that such exemption is available. If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis.
If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if the Company is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
If the Company calls the Public Warrants for redemption, as described above, its management will have the option to require any holder that wishes to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of Class A common stock issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a share dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, except as described below, the Public Warrants will not be adjusted for issuances of Class A common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the Public Warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of Public Warrants will not receive any of such funds with respect to their Public Warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such Public Warrants. Accordingly, the Public Warrants may expire worthless.
In
addition, if (x) the Company issues additional shares of Class A common stock or equity-linked securities for capital raising
purposes in connection with the closing of its initial Business Combination at an issue price or effective issue price of less than $
At
March 31, 2022 and December 31, 2021, there were
15
KLUDEIN I ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
NOTE 9 — FAIR VALUE MEASUREMENTS
The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
| Level 1: | Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. |
| Level 2: | Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active. |
| Level 3: | Unobservable inputs based on the Company’s assessment of the assumptions that market participants would use in pricing the asset or liability. |
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at March 31, 2022 and December 31, 2021, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
| Description | Level | December 31, 2021 | March 31, 2022 | |||||||
| Assets: | ||||||||||
| Cash and marketable securities held in Trust Account | 1 | $ | $ | |||||||
| Liabilities: | ||||||||||
| Warrant Liabilities – Public Warrants | 1 | |||||||||
| Warrant Liabilities – Private Placement Warrants | 3 | |||||||||
| Convertible Promissory Note – Related Party | 3 | |||||||||
The warrants were accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on the accompanying condensed balance sheets. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the condensed statements of operations.
As of March 31, 2022 and December 31, 2021, the Private Placement Warrants were valued using a binomial lattice model which is considered to be a Level 3 fair value measurement. The binomial lattice model’s primary unobservable input utilized in determining the fair value of the warrants is the expected volatility of the common stock. The expected volatility as of the closing date of the Initial Public Offering was derived from observable Public Warrant pricing on comparable ‘blank-check’ companies without an identified target. The expected volatility as of subsequent valuation dates was implied from the Company’s own Public Warrant pricing. As of March 31, 2022 and December 31, 2021, the Public Warrants were valued using the level 1 quoted prices in an active market.
16
KLUDEIN
I ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
The following table provides quantitative information regarding Level 3 fair value measurements for Private Placement Warrants at March 31, 2022 and December 31, 2021:
| As of March 31, 2022 | As of December 31, 2021 | |||||||
| Stock price | $ | $ | ||||||
| Strike price | $ | $ | ||||||
| Volatility | % | % | ||||||
| Risk-free rate | % | % | ||||||
| Probability of Business Combination occurring | % | % | ||||||
| Dividend yield | % | % | ||||||
| Fair value of warrants | $ | $ | ||||||
The following table presents the changes in the fair value of Level 3 warrant liabilities for the three months ended March 31, 2021:
| Private Placement | Public | Warrant Liabilities | ||||||||||
| Fair value as of January 1, 2021 | $ | $ | $ | |||||||||
| Initial measurement on January 11, 2021 | ||||||||||||
| Change in valuation inputs or other assumptions | ( | ) | ( | ) | ( | ) | ||||||
| Transfer to Level 1 | ( | ) | ( | ) | ||||||||
| Fair value as of March 31, 2021 | $ | $ | $ | |||||||||
The following table presents the changes in the fair value of Level 3 warrant liabilities for the three months ended March 31, 2022:
| Private Placement | ||||
| Fair value as of January 1, 2022 | $ | |||
| Change in fair value | ( | ) | ||
| Fair value as of March 31, 2022 | $ | |||
Transfers to/from
Levels 1, 2 and 3 are recognized at the end of the reporting period in which a change in valuation technique or methodology occurs.
The estimated fair value of the Public Warrants transferred from a Level 3 measurement to a Level 1 fair value measurement during
the three months ended March 31, 2021 was $
The Convertible Note was measured at fair value as of the date of the initial borrowing on January 31, 2022, and as of March 31, 2022. The discounted cash flow method was used to value the debt component of the Convertible Note and the Black Scholes Option Pricing Model was used to value the debt conversion option. There were no transfers in or out of Level 3 from other levels in the fair value hierarchy during three months ended March 31, 2022 for the Convertible Note.
The following table provides quantitative information regarding Level 3 fair value measurements for the Convertible Promissory Note – Related Party at March 31, 2022 and January 31, 2022:
| As of March 31, 2022 | As of January 31, 2022 | |||||||
| Stock price | $ | $ | ||||||
| Strike price | $ | $ | ||||||
| Volatility | % | % | ||||||
| Risk-free rate | % | % | ||||||
| Probability of Business Combination occurring | % | % | ||||||
| Dividend yield | % | % | ||||||
17
KLUDEIN
I ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
The following contains additional information regarding the inputs used in the pricing models:
| ● | Term – the expected life of the warrants was assumed to be equivalent to their remaining contractual term. |
| ● | Risk-free rate – the risk-free interest rate is based on the U.S. treasury yield curve in effect on the date of valuation equal to the remaining expected life of the Warrants. |
| ● | Volatility – the Company estimated the volatility of its common stock warrants based on implied volatility and actual historical volatility of a group of comparable publicly traded companies observed over a historical period equal to the expected remaining life of the Warrants. |
| ● | Dividend yield – the dividend yield percentage is zero because the Company does not currently pay dividends, nor does it intend to do so during the expected term of the Private Placement Warrants. |
The following table presents the changes in the fair value of Level 3 Convertible Promissory Note – Related Party for the three months ended March 31, 2022:
| Convertible Promissory Note | ||||
| Fair value as of January 1, 2022 | $ | |||
| Initial measurement at January 31, 2022 | ||||
| Change in fair value | ( | ) | ||
| Fair value as of March 31, 2022 | $ | |||
Transfers to/from Levels 1, 2 and 3 are recognized at the end of the reporting period. There were no transfers during the three months ended March 31, 2022.
NOTE 10 — SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the condensed financial statements were issued. Based upon this review, except as identified below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the condensed financial statements.
On April 1, 2022, the Company
drew an additional $
18
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to KludeIn I Acquisition Corp. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to KludeIn Prime LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the completion of the proposed Business Combination (as defined below), the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements, including that the conditions of the Proposed Business Combination are not satisfied. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s final prospectus for its Initial Public Offering filed with the U.S. Securities and Exchange Commission (the “SEC”). The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Overview
We are a blank check company formed under the laws of the State of Delaware on September 24, 2020, for the purpose of effecting a Business Combination. We intend to effectuate our Business Combination using cash from the proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, our capital stock, debt or a combination of cash, stock and debt.
We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a Business Combination will be successful.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities from September 24, 2020 (inception) through March 31, 2022 were organizational activities, those necessary to prepare for the Initial Public Offering and subsequent to the Initial Public Offering, identifying a target company for a Business Combination. We do not expect to generate any operating revenues until after the completion of our Business Combination. We generate non-operating income in the form of interest income and unrealized gains on marketable securities held in the Trust Account, and gains or losses from the change in fair value of the warrant liabilities and the convertible promissory note. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.
For the three months ended March 31, 2022, we had net income of $5,780,589, which consists of changes in fair value of the warrant liabilities of $6,376,210, change in fair value of convertible promissory note – related party of $5,400 and interest earned on marketable securities held in the Trust Account of $41,450, partially offset by formation and operational costs of $640,840 and an unrealized loss on marketable securities held in the Trust Account of $1,631.
For the three months ended March 31, 2021, we had net income of $1,388,100, which consists of changes in fair value of the warrant liabilities of $2,212,000 and interest earned on marketable securities held in the Trust Account of $33,277, partially offset by formation and operational costs of $333,548, transaction costs allocated to warrants of $523,013 and an unrealized loss on marketable securities held in the Trust Account of $616.
19
Factors That May Adversely Affect Our Results of Operations
Our results of operations and our ability to complete an initial Business Combination may be adversely affected by various factors that could cause economic uncertainty and volatility in the financial markets, many of which are beyond our control. Our business could be impacted by, among other things, downturns in the financial markets or in economic conditions, increases in oil prices, inflation, increases in interest rates, supply chain disruptions, declines in consumer confidence and spending, the ongoing effects of the COVID-19 pandemic, including resurgences and the emergence of new variants, and geopolitical instability, such as the military conflict in the Ukraine. We cannot at this time fully predict the likelihood of one or more of the above events, their duration or magnitude or the extent to which they may negatively impact our business and our ability to complete an initial Business Combination.
Liquidity and Going Concern
On January 11, 2021, we consummated the Initial Public Offering of 17,250,000 units, at a price of $10.00 per unit, which included the full exercise by the underwriters of their over-allotment option in the amount of 2,250,000 units, generating gross proceeds of $172,500,000. Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 5,200,000 Private Placement Warrants to the Sponsor at a price of $1.00 per Private Placement Warrant generating gross proceeds of $5,200,000.
Following the Initial Public Offering, the full exercise of the over-allotment option, and the sale of the Private Placement Warrants, a total of $172,500,000 was placed in the Trust Account. We incurred $14,303,235 in transaction costs, including $3,450,000 of underwriting fees, $6,037,500 of deferred underwriting fees, $4,411,238 of fair value of the Founder Shares attributable to the Anchor Investor and $404,497 of other offering costs.
For the three months ended March 31, 2022, cash used in operating activities was $706,734. Net income of $5,780,589 was affected by changes in fair value of the warrant liabilities of $6,376,210, change in fair value of convertible promissory note – related party of $5,400, interest earned on marketable securities held in the Trust Account of $41,450 and an unrealized loss on marketable securities held in Trust Account of $1,631. Changes in operating assets and liabilities used $65,894 of cash for operating activities.
For the three months ended March 31, 2021, cash used in operating activities was $740,392. Net income of $1,388,100 was affected by change in fair value of the warrant liabilities of $2,212,000, interest earned on marketable securities held in the Trust Account of $33,277, transaction costs allocated to warrants of $523,013 and an unrealized loss on marketable securities held in Trust Account of $616. Changes in operating assets and liabilities used $406,844 of cash for operating activities.
At March 31, 2022, we had cash and marketable securities held in the Trust Account of $172,620,428 (including approximately $120,428 of interest income, including unrealized loss) consisting of U.S. treasury bills with a maturity of 185 days or less. Interest income on the balance in the Trust Account may be used by us to pay taxes. Through March 31, 2022, we had not withdrawn any interest earned from the Trust Account.
We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (less deferred underwriting commissions and income taxes payable), to complete our Business Combination. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
At March 31, 2022, we had cash of $43,339 and borrowing capacity under the convertible promissory note of $1,150,000. On April 1, 2021 an additional $112,500 was borrowed under the convertible promissory note agreement. We intend to use the funds held outside the Trust Account and this borrowing capacity primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete a Business Combination.
20
In order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, our Sponsor or an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to, make Working Capital Loans. Such Working Capital Loans would be evidenced by promissory notes. If we complete a Business Combination, we may repay the notes out of the proceeds of the Trust Account released to us. In the event that a Business Combination does not close, we may use a portion of the working capital held outside the Trust Account to repay the notes, but no proceeds from our Trust Account would be used for such repayment. On January 21, 2022, we issued a promissory in the principal amount of up to $1,500,000 to our Sponsor and to date have drawn $462,500 under this arrangement. The note is non-interest bearing and payable upon the consummation of a Business Combination or may be convertible into warrants of the post-Business Combination entity at a price of $1.00 per warrant at the option of the lender. The warrants would be identical to the Private Placement Warrants.
As indicated in the accompanying condensed financial statements, at March 31, 2022, the Company had $43,339 in cash, and a working capital deficit of $478,142, which excludes $50,000 of interest earned on Trust which is available to pay Delaware franchise taxes payable. As of March 31, 2022, approximately $120,000 of the amount on deposit in the Trust Account represented interest income, which is available to pay the Company’s tax obligations and up to $100,000 of dissolution expenses.
The Company’s liquidity needs prior to the consummation of the Initial Public Offering were satisfied through the proceeds of $25,000 from the sale of Founder Shares, and loans from the Sponsor of approximately $89,000. The loan was repaid in full on January 11, 2021. Subsequent to the consummation of the Initial Public Offering, the Company’s liquidity has been satisfied through the net proceeds received from the consummation of the Initial Public Offering and the sale of Private Placement Warrants.
In connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standards Board’s Accounting Standards Codification Subtopic 205-40, “Presentation of Financial Statements – Going Concern,” the Company has until July 11, 2022, to consummate an initial Business Combination. It is uncertain that the Company will be able to consummate an initial Business Combination by this time. If an initial Business Combination is not consummated by this date, there will be a mandatory liquidation and subsequent dissolution of the Company. Additionally, the Company may not have sufficient liquidity to fund the working capital needs of the Company through one year from the issuance of these condensed financial statements. Management has determined that the liquidity condition and mandatory liquidation, should an initial Business Combination not occur, and potential subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after July 11, 2022.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of March 31, 2022. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities.
The underwriters are entitled to a deferred fee of $0.35 per unit, or $6,037,500 in the aggregate. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that we complete a Business Combination, subject to the terms of the underwriting agreement.
Critical Accounting Policies
The preparation of condensed financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have not identified any material changes to the critical accounting policies included in our Annual Report on Form 10-K filed with the SEC on April 12, 2022, except as follows:
Convertible Instruments
The Company evaluated the accounting for its promissory notes that feature conversion options in accordance with ASC 815, Derivatives and Hedging Activities (“ASC 815”). ASC 815 requires companies to bifurcate conversion options from their host instruments and account for them as freestanding derivative financial instruments according to certain criteria. The criteria includes circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) a promissory note that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. However, the Company has elected to account for its promissory notes at fair value, as described in Note 9.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our condensed financial statements.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2022. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective, due solely to the material weakness in our internal control over financial reporting related to the Company’s accounting for complex financial instruments. As a result, we performed additional analysis as deemed necessary to ensure that our condensed financial statements were prepared in accordance with GAAP. Accordingly, management believes that the condensed financial statements included in this Quarterly Report present fairly in all material respects our financial position, results of operations and cash flows for the periods presented.
We plan to continue to enhance our system of evaluating and implementing the accounting standards that apply to our condensed financial statements, including through enhanced analyses by our personnel and third-party professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects. We plan to further improve this process by enhancing access to accounting literature, identification of third-party professionals with whom to consult regarding complex accounting applications and consideration of additional staff with the requisite experience and training to supplement existing accounting professionals.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
As of the date of this Quarterly Report, except as set forth below, there have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on April 12, 2022.
Changes in laws or regulations, or a failure to comply with any laws and regulations, may adversely affect our business, including our ability to negotiate and complete our initial business combination and results of operations.
We are subject to laws and regulations enacted by national, regional and local governments. In particular, we will be required to comply with certain SEC and other legal requirements. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly. Those laws and regulations and their interpretation and application may also change from time to time and those changes could have a material adverse effect on our business, investments and results of operations. In addition, a failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on our business, including our ability to negotiate and complete our initial business combination and results of operations
On March 30, 2022, the SEC issued proposed rules relating to, among other items, disclosures in business combination transactions involving special purpose acquisition companies (“SPACs”) and private operating companies; the financial statement requirements applicable to transactions involving shell companies; the use of projections in SEC filings in connection with proposed business combination transactions; the potential liability of certain participants in proposed business combination transactions; and the extent to which SPACs could become subject to regulation under the Investment Company Act of 1940, as amended, including a proposed rule that would provide SPACs a safe harbor from treatment as an investment company if they satisfy certain conditions that limit a SPAC’s duration, asset composition, business purpose and activities. These rules, if adopted, whether in the form proposed or in a revised form, may increase the costs of and the time needed to negotiate and complete an initial business combination, and may constrain the circumstances under which we could complete an initial business combination.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
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Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
| * | Filed herewith. |
| ** | Furnished herein. |
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| KLUDEIN I ACQUISITION CORP. | ||
| Date: May 16, 2022 | By: | /s/ Narayan Ramachandran |
| Name: | Narayan Ramachandran | |
| Title: | Chief Executive Officer | |
| (Principal Executive Officer) | ||
| Date: May 16, 2022 | By: | /s/ Mini Krishnamoorthy |
| Name: | Mini Krishnamoorthy | |
| Title: | Chief Financial Officer | |
| (Principal Financial and Accounting Officer) | ||
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